Sasol. Market overreaction opens a gap for investors

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Sasol. Market overreaction opens a gap for investors

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Published Date: 2019-05-25 | Source: INCE|Community | Author: Mark Ingham

Sasol. Market overreaction opens a gap for investors

Ingham Analytics hold a view that a price of R450 for Sasol stock is closer to fair value. The market' overreaction has pushed the share price to R352 - offering traders and investors an opportunity to exploit a short term gap before the fundamentals result in corrections.

The position is based on a through-the-cycle view and assuming more conservative oil prices than at present. Sasol is at its weakest level in five years. Whilst the additional cost overruns are unfortunate, the Lake Charles project is almost complete and will begin contributing to earnings and cash flow during 2019 and 2020. Sasol's liquidity should remain adequate at oil prices above $50/bbl. The impact on earnings assumptions is modest whilst debt to equity will be temporarily elevated, before falling to below 40% in F2022.

Ingham Analytics believes that the overall fundamentals of the company will not be materially affected. Click here to access Louisiana Blues; an incisive Ingham Analytics note that unpacks Sasol's situation and the opportunity that the fall in the share price offers traders and longer-term investors. Click here to see also the useful 8 April "Pain at the pump, gain on the share" Sasol note. Click here



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